Logica and CMG give green light to merger

The proposed £512m takeover of IT services company CMG by its rival, Logica, is to go ahead, the two companies announced on...

The proposed £512m takeover of IT services company CMG by its rival, Logica, is to go ahead, the two companies announced on Tuesday.

The merged company would create Europe's second largest, publicly traded IT services company and a leading provider of mobile messaging software.

A combined Logica and CMG would create cost savings, allowing the new company to compete more effectively with rivals such as EDS and Cap Gemini, said Martin Read, Logica group managing director and proposed group chief executive of the new company.

Read said the combined company would lose 1,400 jobs - some 6% of the workforce - and conceded that integration would be a challenge.

The combined group would have just under 24,000 employees after the merger, with operations in 34 countries, Read said. It would become a global player in software for wireless messaging and payments, with particular strength in the government sector, he added.

"Together we will be a major force in the public sector. Our combined strength will allow us to win a larger number of government contracts in that sector than we would have done individually. The merger gives us a bigger scale to take on bigger works," he said.

Last year, Logica and CMG had combined sales of £2.15bn and together the companies would share 250 clients worldwide, including Ford, Volkswagen, Philips, Barclays, Abbey National, the Department of Trade and Industry, the Ministry of Defence and the Crown Prosecution Service.

The companies said they expected to finalise the deal by the end of the year pending standard shareholder and regulatory approval.

The move intensifies the drive to industry consolidation following IBM's takeover of PwC Consulting, the consulting division of PricewaterhouseCoopers, in a £2.2bn deal.

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